Navigant Research Blog

Rail service company Amtrak posted its annual financial report on November 25, and progress was reported all around. Revenue ($3.2 billion) and ridership (31.6 million passengers) are up over the previous year, and the operating loss of $227 million was the lowest since way back in 1973. However, the loss would have been much greater if not for payments from states and the federal government, which pony up nearly $2 billion annually to support infrastructure upgrades and other costs.

Amtrak is profitable in the Northeast, where it is viewed as indispensable for commuting along the I-95 corridor from Boston to Washington, D.C., but runs far in the red elsewhere, especially on long-distance routes. For fiscal year 2015, Amtrak has requested a federal grant of $1.6 billion, and the number gets higher each year to counter the tunnels, bridges, and tracks that continue to fall into disrepair.

No Free Parking

Perpetually deficit-running Amtrak is a favorite target for fiscal conservatives, such as Mitt Romney, who frequently spoke of defunding the service during the 2012 presidential election. However, the federal government is actually funding the parking of private vehicles at a much higher level. According to a new report by the TransitCenter and the Frontier Group, employers providing tax-free parking allowances cost the federal government $7.3 billion annually in lost revenue.

The Internal Revenue Service’s (IRS’) tax code allows parking allowances of up to $250 per month sans taxes, which is nearly twice the amount allowable for taking public transit ($130), and more than 10 times the allowance for bicycle commuters ($20). The study claims that the tax abatement adds approximately 820,000 commuters who would otherwise find other means of getting to work, including motorists who increase use of roads, another hidden cost to taxpayers.

The True Costs

According to Streetsblog.org, Congress is violating the IRS maximum parking allowance by providing free street parking to staffers in pricey downtown D.C. So we have CAFE regulations aimed at reducing transportation emissions by requiring carmakers to invest billions to produce increasingly fuel efficient vehicles, while at the same time, we subsidize the use of private vehicles in congested urban areas at a cost more than 3 times the total spent to support Amtrak. Taken together, these policies can be viewed as somewhere between inconsistent and outright contradictory.

California’s proposed high-speed rail (HSR) line between Los Angeles and San Francisco is stirring controversy – not surprisingly – for a $68 billion infrastructure project that will take until 2029 to complete. The concerns over the project’s cost-to-benefit ratio cross party lines. While California Republicans have lined up against Democratic Governor Jerry Brown’s proposal, so has his own lieutenant governor, Gavin Newsom. The state successfully beat back a legal challenge to the project’s funding plan, but more legal challenges loom.

Writing in support of the HSR, James Fallows of The Atlanticmakes a key point: “Big infrastructure investments are usually under-valued and over-criticized while in the planning stage.” One obvious comparison is Boston’s Big Dig. That was also enormously ambitious project with a huge price tag that took more than a decade to complete. It had massive cost overruns, becoming the subject of constant complaints in Massachusetts. Today, visiting Boston since the Big Dig’s completion, it’s clear why the expense and hassle was worth it. The city was knit back together after having been split apart by a major road running through its heart. In place of the old elevated highway is a greenway that invites pedestrians and connects with bike-sharing stations.

Easier Than Flying

It’s worth noting that the Big Dig was a huge infrastructure project designed to undo the effects of another ambitious infrastructure project, one that had unforeseen, and disastrous, consequences. Moreover, the Big Dig plan was based on known demand, since it essentially took traffic from above ground and moved it into tunnels. This central purpose removed much of the uncertainty about new infrastructure projects that can keep politicians and planners up at night.

That uncertainty lies at the heart of the debate over high-speed rail. A major new passenger rail project, in a country that has largely abandoned rail travel for cars and planes, is a leap of faith. The most apt comparison for the California HSR is Amtrak’s Boston-New York-Washington corridor. In 2012, Amtrak reported that it had captured 75% of commercial passenger travel between New York and Washington, D.C. The success of the train is not due to its being cheaper – tickets can be as much as $145 one way – but more to the convenience and ease of trains compared to air travel.

HSR Plus Autonomous Vehicles

A key factor in that convenience is that, unlike airlines, the trains deposit passengers into the downtown of each city and connect to local transit services. This multimodal connectivity will be key to the success of the California HSR, whether it means connecting to public transit or to nearby carsharing services like City CarShare and DriveNow in downtown San Francisco.

The rise of autonomous vehicles is frequently cited by key opponents as evidence that the HSR is a 20th century idea whose time has passed. While Navigant Research’s 2014 Autonomous Vehicles report suggests that long-distance, inter-city travel is a possible model for self-driving cars, it projects they’re most likely to be used for passenger travel in carsharing services as well as in fleets as an alternative to taxis for local travel within the city. In this scenario, autonomous vehicles will actually support the high-speed rail line by making carsharing easier and ubiquitous in urban centers while the HSR meets city-to-city travel needs.